CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Investors earn an equilibrium rate of return corresponding to the ______.
A. total risk of a security
B. non-diversifiable risk of a security
C. variance of a security's return
Explanation: The market prices securities according to their non-diversifiable or market risk. Market risk is based on the covariance between the security and the market portfolio in the presence of the risk-free security.

User Contributed Comments 3

User Comment
Kuki you get a return based on the risk that you CANNOT diversify.
Poorvi tough one - I got it wrong :(
BigJimStud The equilibrium part threw me off, I was thinking that referred to the CML which uses stdev(total risk). Had the question said required, systematic would have been more obvious.
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